Russia Retaliates at Europe's Proposal to Lend Immobilized Moscow's Assets to Kyiv

Ukraine is running out of funding to sustain its armed forces and economy, after almost four years of Russia's full-scale war.

For Europe, the answer to filling Ukraine's budget hole of €135.7bn for the coming 24 months lies in Moscow's immobilized funds sitting in Belgian bank Euroclear, and EU leaders aim to give it the green light at their EU leaders' conference next week.

Authorities in Russia caution the EU plan would be an illegal seizure, and the Central Bank of Russia announced on Friday it was taking to court Euroclear in a Moscow court even before a conclusive plan is made.

'Just' to Employ Moscow's Assets, Argue Ukraine and the EU

Overall, Russia has approximately €210bn of its funds blocked in the EU, and €185bn of that is in the custody of Euroclear.

European and Ukrainian authorities argue that those funds should be used to restore what Russia has destroyed: EU officials calls it a "reparations loan" and has devised a plan to bolster Ukraine's economy valued at €90bn.

"It is only just that Moscow's blocked funds should be used to rebuild what Russia has destroyed – and that money then becomes ours," says Ukraine's Volodymyr Zelensky.

Germany's leader Friedrich Merz says the assets will "help Ukraine to shield itself successfully against any future Russian attacks".

Moscow's lawsuit was expected in Brussels. But it is not just Moscow that is unhappy.

The Belgian government is anxious it will be burdened by an huge bill if it all backfires, and Euroclear head Valérie Urbain says using the assets could "undermine the international financial system".

Euroclear also has an roughly €16-17bn locked in Russia.

The leader of Belgium Bart de Wever has presented the EU with a series of "pragmatic, fair, and legitimate conditions" before he will accept the reconstruction loan scheme, and he has left open the possibility of legal action if it "poses significant risks" for his country.

The Details of the EU's Proposal?

Brussels is under pressure before next Thursday's summit to finalize a arrangement that Belgium can accept.

Until now the EU has held off using the frozen capital directly but starting in 2024 has paid the "extraordinary revenues" from them to Ukraine. In 2024 that was €3.7bn. Juridically, using the profits is seen as permissible as Russia is subject to sanctions and the proceeds are not property of the Russian state.

But foreign defense assistance for Ukraine has slipped dramatically in 2025, and Europe has had trouble trying to compensate for the shortfall caused by the US decision to all but stop funding Ukraine under President Donald Trump.

There are presently two EU plans designed to supplying Ukraine with €90bn, to finance two-thirds of its financial requirements.

• One is to secure the capital on capital markets, secured against the EU budget as a guarantee. This is Belgium's favored solution but it needs a consensus by EU leaders and that would be problematic when two member states are against funding Ukraine's military.
• The alternative is providing a loan of Ukraine cash from the Moscow's immobilized capital, which were initially held in financial instruments but have now largely turned into cash. That capital is an asset of Euroclear located within the European Central Bank.

The EU's executive recognizes Belgium has legitimate concerns and states it is convinced it has dealt with them.

The plan is for Belgium to be protected with a guarantee encompassing all the €210bn of Russian assets in the EU.

Should Euroclear suffer a loss of its own assets in Russia, the loss would be compensated from assets belonging to Russia's own settlement agency which are in the EU.

If Russia targeted Belgium itself, any decision by a Russian court would not be recognized in the EU.

In a key development, EU ambassadors are set to approve on Friday to freeze indefinitely Russia's central bank assets held in Europe indefinitely.

Until now they have had to vote unanimously every six months to renew the freeze, which could have meant a ongoing risk to Belgium.

The EU ambassadors are set to use an emergency clause under Article 122 of the EU Treaties so the assets continue to be immobilized as long as an "direct danger to the economic interests of the union" continues.

The Reasons Belgium is Remains On Board

The Belgian government is insistent it remains a strong supporter of Ukraine, but perceives legal risks in the plan and fears being left to handle the fallout if things do not work out.

A usually partisan political environment in this case has united behind Prime Minister Bart de Wever, who is facing pressure from European colleagues.

"Belgium is a small economy. Belgian GDP is around €565bn – consider if it would need to shoulder a €185bn bill," comments Veerle Colaert, professor of financial law at KU Leuven University.

While the EU might be able to obtain adequate guarantees for the loan itself, Belgium worries about an further exposure of being exposed to extra damages or penalties.

Prof Colaert also believes the stipulation for Euroclear to issue credit to the EU would violate EU banking regulations.

"Financial institutions need to follow prudential rules and shouldn't put all their eggs in one basket. Now the EU is instructing Euroclear to do exactly that.

"Why do we have these banking laws? It's because we want banks to be secure. And if things fail it would become the responsibility of Belgium to bail out Euroclear. That's a further cause why it's so important for Belgium to secure water-tight protections for Euroclear."

Europe In a Difficult Position from All Sides

The situation is urgent, state several EU member states including those neighboring Russia such as the Baltics, Finland and Poland. They maintain the frozen assets plan is "a economically realistic and politically realistic solution".

"This is a crucial test for us," warns leading German conservative MP Norbert Röttgen. "Should we not succeed, I don't know what we'll do subsequently. That's why we have to finalize the deal in a week's time".

Although Russia is unyielding its money should not be touched, there are additional apprehensions among EU officials that the US may want to use Russia's blocked funds in another way, as part of its own diplomatic proposal.

Zelensky has indicated Ukraine is coordinating with Europe and the US on a reconstruction fund, but he is also aware the US has been engaging with Russia about potential collaboration.

An initial document of the US peace plan mentioned $100bn of Russia's frozen assets being used by the US for reconstruction, with the US {taking|receiving